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Seanad Éireann debate -
Wednesday, 6 Mar 1963

Vol. 56 No. 5

Bille Chuan Luimnigh (Droichead), 1963. - Restrictive Trade Practices (Confirmation of Order) Bill, 1963: Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

The object of this Bill is to confirm an Order which I have made under the Restrictive Trade Practices Act, 1953, on the recommendation of the Fair Trade Commission, regarding the operation of resale price maintenance in the supply and distribution of hand knitting yarns.

I propose to give here a summary of the Commission's report of their Enquiry into the matter, of which Senators have already received copies.

At the time of the Enquiry, most of the market in hand knitting yarns was supplied by three large home manufacturers. Imports were small, and were subject to 33? per cent. Customs duty, except in the case of some specialty yarns which are not produced in this country.

All three firms specified retail prices for their goods. The list prices suggested by two of them, if adhered to, would give wholesalers a margin of 15 per cent. to 17 per cent. and retailers 23 per cent. The prices suggested by the third manufacturer allowed wholesalers a mark up of 9 per cent. and retailers 33? per cent. Settlement discounts were also provided in all cases.

These three manufacturers stated at the Enquiry that they supported the policy of resale price maintenance, although not enforcing it at that time, because, as the bulk of their sales was through wholesalers, enforcement was not considered practicable. Some wholesalers also testified that they were in favour of resale price maintenance, although they stated that it would be very difficult to enforce it.

Evidence at the Enquiry revealed that one of the largest manufacturers had adopted a policy of resale price maintenance in 1956, following representations by wholesalers. They applied it principally to the wholesale trade, but also to some large retailers whom they supplied directly, and they enforced it to the extent of withholding supplies in a number of cases. Even though they announced their intention of abandoning the policy in 1961, on the ground that its operation was not effective due to the non-co-operation of some wholesalers, they still refused to accept orders from some traders from whom supplies had previously been withheld, and continued to advocate price maintenance at wholesale level. They stated, moreover, that if extreme price cutting were again to cause inconvenience to their trade they might have to take further action against it. The Commission pointed out that this firm were in a position of some dominance, and their products in considerable popular demand, so that any trader who was refused supplies by them would be placed at a competitive disadvantage.

The Commission considered that the action taken by this firm to maintain prices unreasonably restricted competition in, and entry to, the trade in hand knitting yarns and retarded the development of a competitive price structure; also, that the attitude of the firm, and of other manufacturers and wholesalers, to the principle of resale price maintenance in this commodity could lead to an extension of the policy if suitable circumstances arose. The Commission accordingly recommended that individual resale price maintenance at all levels of the trade in hand knitting yarns should be prohibited.

The Commission found no evidence of the operation of a collective system of price maintenance, and did not, therefore, put forward any recommendation on that subject.

The Restrictive Trade Practices Act, 1953, provides that an Order of this kind shall not have effect unless it is confirmed by an Act of the Oireachtas. The Bill now before the Seanad is the Confirming Bill which is necessary to give the force of law to the Order concerned. The arrangement in the case of Confirmation Bills is that the Order which it is proposed to confirm would not be subject to amendment by the Oireachtas but would be accepted or rejected as it stands. The matters with which the Order deals have been the subject of a detailed Public Enquiry by the Fair Trade Commission, and their Report sets out the arguments in favour of adopting the provisions contained in the Order. I recommend this Bill to the Seanad, and I believe that its enactment will provide a necessary safeguard against any future attempts at restricting normal competitive conditions in the trade in this commodity and consequently be of benefit to both traders and the public.

The effect of this Order is to prohibit resale price maintenance by a supplier in relation to hand knitting yarns. We had a number of these Orders before us since the setting up of the Fair Trade Commission under the restrictive Trade Practices Act, 1953, and I think I am right in saying that on all occasions these Orders have gone through without very much comment. In view of the fact that at the time when this Act was introduced there was much opposition from large sections of the business community and, of course, on the other hand, some elements in the business community called for action about what are called restrictive trade practices, I thought it well to find out from those in the trade concerned with this matter how they felt the Act had been working in the intervening 11 years and what were their opinions on it.

I thought that this was a matter not only of general interest and of interest to the business people concerned but of interest to Senators and members of the Dáil, because I noticed that when this matter came up in the Dáil it got very cursory treatment. That was, I think, because there are so many matters coming up in the Dáil that there is not somebody there to deal with every Bill that comes up, especially as they come up so often and in such numbers.

When the Act was introduced certain elements were opposed to anything being done in this matter, and they gave reasons which I do not propose to quote now. At the same time, there was a general belief in the trade in the idea of price maintenance. The system had worked pretty well for a great number of years and, in fact, right up to that time. Undoubtedly, there were certain flaws in the system and certain injustices and, perhaps, a certain amount of restrictive practice, but, on the whole, it was felt by many people in trade that the price maintenance system had a lot to be said for it. It was believed that it was a good thing not only for the merchant himself but for the customer as well. It assured the merchant a fair and, generally speaking, not exorbitant working profit, as can be seen from the figures quoted in the Minister's opening statement, because those margins, as quoted, are considerably lower than those prevailing in other countries for similar commodities, as can be found by examination; and for the customer there was an assurance of both the quality of the article and of service.

There was a lot of opposition to the Act, but, on the other hand, it is fair to say that the Act was brought into being by a call from other elements in the business community, as can also be seen from the Minister's statement where it is stated that in the inquiry for this particular Order the manufacturers as a whole and also the wholesalers seemed to be in favour of price maintenance. Generally speaking, it seems that most retailers were in favour of the abolition of price maintenance.

I am not going to make any case against this particular Order, but I have asked the Dublin Chamber of Commerce in a very telegraphic form for the points they have found in their experience of the past 11 years. I propose to quote very briefly what the Chamber have told me:

Against the action of the Fair Trade Commission and against the abolition of the system of price maintenance it is stated that in those distributive trades where price cutting exists a law of the jungle seems to apply. If price maintenance were observed a semblance of order, which is considered desirable, would exist.

It has been the experience in some cases that price cutters do not provide the customer with any accommodation in the field of after sales service.

That is a point which is often made in the motor trade.

Another point against is:

It can also be said that some of the premises from which price cutters carry on their business do not in any way measure up to providing a standard for the customer or proper facilities for their staffs.

In those distributing houses which are operating a price cutting system frequently the labour employed is not of a very high standard, again resulting in poor service for the customer.

In favour of the system of price maintenance it says:

That the Commission served a very useful purpose in getting rid of the system of "closed" lists with which distributors had to comply in supplying goods. As a result of the closed lists which existed before the Commission was appointed some distributors could not open new accounts.

That the Commission itself in making an enquiry into a particular trade causes a lot of inconvenience and embarrassment to that trade but that in the long run the findings of the Commission appear to be in the interests of the community in general.

That it would appear to be very fair for the small trader but not so fair for the larger trader.

That the activities of the Commission at times seem to be to interfere unduly in trade practices.

So much for what I got from the Chamber of Commerce. It is not always remembered on this point of making goods available to anybody who can afford to buy them that the realities of their standing must be considered, perhaps their irresponsibility or the standing of their business operations—their ability to pay does not come into it because they must be able to pay. Under the present system now and under the particular Order, people must be served with goods and, sometimes a very great hardship can be inflicted by unfair abuse of the privileges afforded of free access to suppliers.

In this context I should like to quote a case in point from the January number of the Irish Hardware and Allied Trader. It will be a very short quotation from the leading article:

The liquidation of Thomas Henshaw and Company as we go to Press this month comes as a shock to the entire trade. It is the third major liquidation in the hardware trade in Dublin in 18 months.

Blame for the failure of this firm and any resulting unemployment must be laid upon the Fair Trade Commission. It was the longstanding policy of the Commission which encouraged Henshaws and their voluntary chain group, FAIR to sell goods at less than cost prices, and after this had begun the Commission was quick to reprimand manufacturers (including some outside this State) who had withheld their goods from the company for that reason, and to stand in the way of those who would protect the firm from the consequences of its own folly.

But Henshaws apparently, and quite understandably, believed that they could bully manufacturers into conforming to the firm's price policy by the threat of invoking the big stick of the Fair Trade Commission should they refuse supplies and thus eliminate all competition.

Finally it says:

Distributors find it difficult to understand why that body has ignored its duty to provide adequate safeguards against extreme price competition, the whole purpose of which is to eliminate trade competitors by unfair means.

The Commission was set up with an obligation to deal with the problem of unjust competition. Until its £3,100-a-year members come to admit that unjust competition includes more than resale price maintenance, that body will continue to work against the interests of the State. And in a time when co-operation between the various sections of the community is required as never before, it will continue to set one section against another. Under such an unfair anti-trader policy, Henshaws will not be the last failure in our trade.

The point is referred to in another quotation which I shall make later.

Fair trading is not only fair trading in the interest of the consumer—and sometimes the misconceived interests of the consumer because quality and service enter into the question. Fair trading must be more than fair trading one way; it must be fair trading both ways. It must be fair trading with regard to one's competitors. If a firm has access to a market and to wholesalers and even if, knowing that it is going into liquidation, it sells goods below cost price, that aspect of the matter should surely attract the attention of the Commission. It is felt in trade circles generally that the question is one-sided because of this particular matter. I should like to quote further. The Minister might have something to tell us because this refers to a memorandum sent to the Minister by the Federation of Trade Associations on December 31st.

It accused him of allowing the Commission to take much too narrow a view of their responsibilities in that regard. The abolition of price maintenance and the giving of free access to overcrowded trades were not the sole purposes for which that body was set up. Guiding principles to assist it in regulating unfair trade practices had also been established.

In the Schedule to the Act, unfair trade practice had been defined as "a practice which had or is likely to have the effect of unjustly eliminating a trade competitor," and distributors, therefore, found it hard to understand why the Commission had so far ignored their duty to provide adequate safeguards against extreme price competition as an unfair practice.

For my own part I should like to say that there has been a considerable change in the philosophy of retailing since this Fair Trade Commission was established in 1953. I myself at that time subscribed to the system of price maintenance as it was operating at that time, but methods have changed very much since and there is a case for more free trading of the kind allowed and provided for in this Order. There are exceptions and I would make this exception: it is too broadly worded. In mass-produced goods there is no case for price maintenance especially now with the large markets and large groups of markets created by multiple stores. It is both impracticable and undesirable that there should be any question of price maintenance regarding mass-produced goods.

In the case of specially goods which have to be so expensively advertised and certain kinds of luxury goods, there is no case for price maintenance. Not only the question of price maintenance but the supplier having to supply under the law should not apply to such things as cosmetics. In the case of cosmetics the condition of the article which the customer purchases in the shop is of great importance. In the case of cream, if every chemist or shopkeeper in the country were allowed to be supplied from the cosmetic suppliers it would be found that most of the stuff would be dangerous to use. It might be a long time in stock and might have deteriorated and become full of bacteria. In that particular instance I had a case where people in the country wrote to me to see if I could get agencies for these well-known makes and the answer I got was that they could not supply these people because of risk of deterioration in their stocks which would do very great harm to the customers here.

Let us get back to hand-knitting yarns.

As I said, the effect of this Order was to prohibit retail price maintenance. I think under present circumstances there will be an acceptance by the trade of this Order in good spirit. At the same time, anybody who reads the report of the Commission cannot help being struck by the fact that very often there is a tendency by the Commission to disregard the long experience of the people who come there to give evidence, although in this particular case I do not think that that has been too bad. I know of other cases where there is an honest feeling amongst traders, and people in trade disputes, and especially in the wholesale and manufacturing side where they felt they have not really got a satisfactory or fair deal and that they are inclined to be over-ridden and ignored. Subject to those remarks, I support this Bill.

I propose to stick to my knitting more than Senator McGuire did.

It is the Second Reading.

I am not criticising the Senator. I think I am entitled to remain strictly within the rules of order by referring only to what this Bill contains and provides for. It provides for the bringing into operation by way of statute of recommendations of the Fair Trade Commission in relation to hand-knitting yarns. There are very wide issues involved in what Senator McGuire raised. They go to the root of the establishment of the Fair Trade Commission, and I think another occasion will be used for wider debate on the effect of price maintenance and price cutting on reasonable competition in trade.

The Commission on this occasion investigated two particular commodities—ladies' nylon stockings and handknitting yarns. I think, if I quote from the final paragraphs of the recommendation in respect of each of these commodities made by the Commission, it will indicate clearly why in this case—the case of handknitting yarns—the Commission thought fit to recommend that an Order be made, to be covered by statute. In the first place, as far as stockings are concerned, they found that there was no collective price maintenance in operation by the manufacturers or wholesalers. If there was such, no doubt the Commission would have recommended the making of an Order in respect of stockings. They did find that there was price maintenance operated by one particular supplier but, having regard to the variety of stockings available and having regard to the number of manufacturers who had access to this market, they state that the effective price maintenance operated by one particular producer was not significant and did not operate sufficiently against the public interest to justify the recommendation to make an Order.

It was different, however, in the case of handknitting yarns because, as the report points out, there are only three main manufacturers of handknitting yarns in this country and one particular firm of these commanded a very high proportion of the Irish market. In other words, their particular hand-knitting yarns were in very great popular demand. Because, therefore, this firm did at some stage operate a price maintenance system they felt that entry to the trade was undoubtedly restricted insofar as if that particular manufacturing firm found one of its customers not operating its price maintenance system then it would, and did, withhold supplies from a particular retail outlet. It is because of the position of dominance in that particular firm that they decided to recommend the making of an Order.

They found, incidentally, that there was not collective price maintenance in handknitting yarns but the fact that the major manufacturer did operate, at some stage, price maintenance and did suggest in evidence before the tribunal that if circumstances warranted they would at another stage have likewise recommended price maintenance. It was only in these circumstances, because it would be against the public interest and against the maintenance of reasonable competition in the trade that they pressed the making of this Order. I think it is reasonable in all the circumstances. As far as the wider issues raised by Senator McGuire are concerned, I think these can be discussed at another time.

Question put and agreed to.
Agreed to take remaining Stages today.
Bill considered in Committee.
Question proposed: "That Section 1 stand part of the Bill".

This is something I am in favour of with the Commission. Objection has been taken to the fact that although there is a limit to a maximum price there is no limit to a minimum price. In other words, the goods can be sold below cost. I can quite see the Commission's difficulty that it would not be possible to fix a minimum price at which they would be sold because that would prevent people selling at sales and so on. Many people have to realise their stocks at less than cost. They may be out of fashion or for one reason or another. It is an important thing and traders believe there should be a lower minimum as well as a higher maximum.

I must agree with what the Senator says. While I appreciate the difficulty created by excessive price cutting by some traders, it must be realised that it would be extremely difficult to legislate against it, having regard to what the Senator has just said regarding the incidence of sales in the ordinary case in this country. Something on which I again agree with the Senator is that traders do not always take into account when they make a case for price cutting.

Question put and agreed to.
Section 2 agreed to.
Title agreed to.
Bill reported without amendment, received for final consideration and passed.